White House unveils overtime rules, raises cutoff to $47,476

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Dive Brief:

The White House has released the much-discussed and awaited details of the new Department of Labor overtime pay rules, raising the exempt threshold from $23,660 to $47,476 per year — under which most salaried workers are guaranteed overtime.

Additionally, this new threshold will be automatically updated every three years. Employers have a longer time to adjust, with the rule to go into effect Dec. 1, not the 60 days that was expected.

The White House unveiled both a fact sheet and an email from President Obama on the new rule, which also raises the "highly compensated employee" threshold — from $100,000 to $134,004 — above which only a minimal showing is needed to demonstrate an employee is not eligible for overtime. There will be no changes to the existing "duties test," and it will allow bonuses and incentive payments to count toward up to 10% of the new salary level.

Dive Insight:

The White House fact sheet says the DOL will be finalizing the rules today. The new rules are expected to extend overtime protections to 4.2 million more Americans who are not currently eligible under federal law. It is expected to boost wages for workers by $12 billion over the next 10 years.

Reactions, of course, are mixed. "This is a big deal to be able to help that many working people without Congress having to pass a new law," Ross Eisenbrey of the Economic Policy Institute, told the New York Times. "It's really restoring rights that people had for decades and lost."

Vice President Joseph Biden, who is expected to be in Columbus, Ohio, later today to officially unveil the new rules, told the Times they touched on a core issue of ensuring that middle-class workers are treated fairly.

But critics believe the rules will be expensive for employers and actually negatively impact salaried employees who are now required to track their hours to keep them under the 40-hour overtime limit.

"This is an extreme revision in the white-collar threshold," David French of the National Retail Federation told the Times. "By executive fiat, the Department of Labor is effectively demoting millions of workers."

"Given that the whole point of incentive pay is that employees receive it only when they meet specific goals, and given that overtime is supposed to be calculated on the basis of each individual workweek, this would suggest a scenario in which employees’ FLSA classification could vary from week to week depending on whether or not they hit their goals," Michael Cardman, Legal Editor, XpertHR USA previously told HR Dive.

As with past White House initiatives (for one, the Affordable Care Act), Republican lawmakers have vowed to block the new DOL rules, the Times reports.